Japan’s Longevity Revolution and the Implications for Health
Care Finance and Long-Term Care

Les Mayhew


This paper consists of five related notes on Japenese health care.

Section 1 of the paper proposes a simple model of health care needs in a
stationary population where all the sickness is concentrated in the period
leading up to death. The main variables determining the burden of health
care, such as life expectancy, duration of chronic illness prior to death, etc.,
are identified. While we are not able to comment (at this time), on trends in
the prevalence of chronic conditions in old age, extrapolation of trends in life
expectancy presented in Section 2 of the paper suggest that there will be
continuing increase in the number of Japenese surviving to extremely old
ages. This ageing of the population will assuredly put upward pressure on
health spending, but this pressure must be put in context of other factors.
Section 3 decomposes increase in Japenese health care spending into portions
attributable to overall demographic increase, change in population age structure,
and change in a residual “underlying factors” term subsuming changes in technology,
health system coverage, etc. The residual dominates total increase in health care
spending. In fact, based on historical data and projected demographic trends, the
strongest upward pressure from population aging occurred in the period 1980-95,
when ageing accounted for 1.4 percentage points of 5.6% total health care
expenditure growth. Health care spending growth attributed to ageing is estimated
to be 1.13% per annum in 1995-2020 and only 0.34% per annum in 2020-2050.

Section 4 focuses on home care of the elderly and suggest that there is a
substantial ongoing decline in the supply of potential in-family caregivers.
Lower fertility is an important determinant to this trend. Section 5 describes
the overall profile of the Japenese health care system, noting it receives relatively
high marks in international comparisons but tends to lump together acute care
and chronically ill patients. As recognised by the “Gold Plan” policy currently
being implemented, there is a severe shortage of nursing home facilities beds
as well as services to make home care a more practical option for families. A
simple ratio analysis suggests that the number of bedridden chronically ill persons
(i.e. the population that would ideally be cared for in a nursing home setting) will
reach 1,800,000 by 2020 as oppossed to 600,000 today.

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